Sunday, September 16, 2007

SHOULD BELGIUM BE ABOLISHED?

Sometimes it is right for a country to recognise that its job is done. This is one of the previous headlines in the Economist (link)

The question set in the article "Time to call it a day" is whether Belgium should no longer exist mainly because of the fractions between French-speaking Wallons and Dutch-speaking Flemings. The latest elections thus reflected the revealed political preference of the voters, prefering to vote upon the lines of linguistic roots. In sum, the result was the inability to form the government. The tension heated up as Flemish parliament inevitably considered the declaration of independence. There is a popular quote saying that Belgians have nothing in common except for the king, the football team and some bears. A very delicious chocolate could be added onto that list.

Economically, Brussels could harldy be recognized as a high-tech, free-enterprise powerhouse of Europe. Instead, it gains its strength as a bureaucratic center of Europe, as a city known as a center of government intervention and infamous European-styled central planning and extensive government structure and income redistribution headlined by the European Commission and European Parliament. In spite of the fact that at the end of the World War 2, Belgium was economically far more developed than Ireland, in terms of standard of living as well as in terms of fundamental macroeconomic indicators such as GDP growth and the share of capital formation in the GDP. In 1980, Belgium had a GDP per capita of $9478,99 USD in current prices while Ireland had a GDP per capita of $5746,20 USD. In 2004, after Ireland's supply-side feedback, Ireland's GDP per capita increased five-fold compared to 1980, after inflation adjustment. In contrast, Belgium's GDP increased three-fold between the same period, also after adjusting the GDP per capita with inflation (link).

In the long run, the macroeconomic forecast regarding Belgium is subject to severe structural risk such as ageing population and therefore age-dependency on public retirement schemes and contribution-funded public health care services financed through budget outlays, grabbing a growing portion of the GDP. By 2012, the real GDP growth is estimated to slide down to 0,9 percent (link).

Generally speaking, the splitting-up of Belgium into two separate units could dramatically reduce compliance costs since political decision-making and the ability to fight with long-term demographic pressures originally emerged from labor supply squeeze, and also to fight the disease of onerous government spending and high tax burden. In fact, the benefits of Belgium's abolishment accomplish more openness to individual liberty and the ability to impose the decision-making with fewer painful cost proportions, not just re-assesing the cradle of welfare dependency which has indeed punished the Belgium's international competitiveness compared to high-growing tigers such as Ireland.